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2016 (2) TMI 301 - ITAT DELHI

2016 (2) TMI 301 - ITAT DELHI - TMI - Service tax collected in relation to projects where the income was being offered to tax on gross basis u/s 44D r.w.s. 115A - CIT(A) held that the service tax was not the part of the gross receipts to be taxed u/s 44D r.w.s 115A - Held that:- Service tax being a statutory liability, would not involve any element of profit and accordingly, the same could not be included in the total receipts for determining the presumptive income. In the light of view taken by .....

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ived towards reimbursement - Decided against revenue - I.T.A. No. 422/Del/2014 - Dated:- 8-2-2016 - Smt. Diva Singh, Judicial Member And Sh. O. P. Kant, Accountant Member For the Appellant : Ms. Rakhi Vimal, Sr. DR For the Respondent : None ORDER Per Diva Singh, JM The present appeal has been filed by the Revenue assailing the correctness of the order dated 14.11.2013 of CIT(A)-XXIX, New Delhi pertaining to 2008-09 assessment year on the following grounds:- 1. On the facts and in the circumstanc .....

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arte qua the assessee respondent on merit. 3. A perusal of the record shows that the assessee company incorporated in France and is in the business of providing consulting, advisory and supervision services in the field of road infrastructure projects. During the year, the assessee as per record was working on 29 projects all over India. In the year under consideration the assessee returned an income of ₹ 5,69,72,993/- which was subsequently revised by filing a revised return declaring a t .....

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the amount of service tax does not have element of income. The following details were furnished:- Name of the Project Amount of Service Tax • JPKG ₹ 3,61,943/- • NH 2 Rs.17,18,784/- • KSHIP ₹ 2,14,778/- Total Rs.22,95,505/- 4. The assessee s contention was not accepted by the AO and the said amount was added to the taxable income of the assessee. The assessee carried out the issue in appeal before the CIT(A) who addressed the background of the issued in the following m .....

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wherein a total income of ₹ 7,95,38,692/- was declared. During the course of assessment proceedings u/s 143(3), the AO found that the appellant has collected service tax to the tune of ₹ 22,95,505/- from the parties from whom FTS have been received. The AO subjected this service tax to tax on gross basis considering it a part of gross receipt in the nature of FTS. The AO took the position that when an item of income is to be taxed on gross basis, it is the gross receipt that had to b .....

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dings, the appellant submitted that similar issue has been decided by then CIT(A) for A.Y. 2007-08 vide-order 4ated 29.07.2011 in assessee's own case and Hon'ble ITAT, Delhi vide its order dated 18.12.2012,has confirmed the relief granted by then CIT(A). The appellant has submitted that facts of the case under consideration are identical to the facts in the preceding A.Y. 2007-08. 4.2. The appellant has submitted that as per service tax law, the service tax is payable by the recipient of .....

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ven though it is the separately mentioned in the invoices raised by the appellant. The amount is payable to the government under statute and the appellant has no lien on this amount. The appellant has relied upon following rulings: (i) Islamic Republic of Iran Shipping Lines vs. DCIT (ii) ACIT vs. Louis Berger International Inc. 40 SOT 370 (Hyd.) 4.3. I have duly considered the submissions made by the appellant. It has been noted that on the similar issue, then CIT(A) has adjudicated that servic .....

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appellant by excluding the amount of service tax received by it from its clients after verifying that sum has been paid to the government a/c. 4.2. Considering which the CIT(A) following the past precedent allowed the appeal of the assessee. 5. Aggrieved by this the Revenue is in appeal before the tribunal. 6. Ld. Sr. DR perusing the copy of the order dated 18.12.2012 in ITA No.4793/Del/2011 passed by the ITAT in the immediately preceding assessment year relied upon the assessment order. 7. We .....

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er dated 29.07.2011 in assessee s own case and Hon ble ITAT, Delhi vide its order dated 18.12.2012 has confirmed the relief granted by then CIT(A). The appellant has submitted that facts of the case under consideration are identical to the facts in the preceding A.y.2007-08. 4.2. The appellant has submitted that as per service tax law, the service tax is payable by the recipient of the service. But responsibility of its collection and deposit is imposed on renderer of the service for the conveni .....

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rnment under statute and the appellant has no lien on this amount. The appellant has relied upon following rulings: (i) Islamic Republic of Iran Shipping Lines vs. DCIT (ii) ACIT vs. Louis Berger International Inc. 40 SOT 370 (Hyd.) 8. On going through the order dated 18.12.2012, we find that the similarity facts and position of law is established as in the preceding assessment year also as the AO herein also has relied upon the decision of the Delhi Bench of the ITAT in the case of Technip Offs .....

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s, such as National Highway Authority of India and State Governments etc. The income derived by the assessee is taxable u/s 44D (projects entered into or before March 31, 2003) and u/s 44D (in respect of contracts entered into after 31.3.2003) read with section 115A of the Act, i.e., at the rate of 20% of gross receipts. During the year, the assessee received an amount of ₹ 13,73,58,441/- from its various clients as fee for technical services including an amount of ₹ 60,95,094/- whic .....

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article 13 of Indo French DTAA. 2.2 The Assessing Officer rejected the contention of the assessee that the service tax did not have any element of income, i.e., it was not in the nature of fee for technical services and, therefore, did not partake the character of income. The Assessing Officer referred to the provisions clause (b) of section 44D of the Act, i.e., no deduction in respect of any expenditure or allowance is allowable in computing the income by way of royalty or fees for technical s .....

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e order of the Co-ordinate Bench:- 4. At the very outset, Ld. Counsel for the assessee submitted that issue raised in this appeal is squarely covered in favour of the assessee by G Bench of the ITAT, Delhi as reported in (2012) 24 Taxmann.com 390 (Delhi) dated 29.06.2010 which has further been followed by E bench, ITAT, Delhi in the case of DDIT vs. M/s Mitchell Drilling International Pty. Ltd., I.T.A. No.698/Del./2012 dated 31.08.2012 in which one of the Member is a party. Therefore, it was ple .....

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ench further shows that the view taken by the CIT(A) in 2007-08 assessment year was upheld relying upon the view taken in the case of Mitchell Drilling international Pte. Ltd. (cited supra). As would be available from the following extract from the said order:- 6. We have heard both the sides, considered the material on record and find that issue is squarely covered in favour of the assessee by various decisions of the benches including E bench, ITAT, Delhi, in the case of DDIT vs. M/s Mitchell .....

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em Offshore Inc., In re, (2011) 337 ITR 207 (AR) dated 25.7.2011, has pleaded for reversal of the order passed by the CIT(A) and restoring that of the Assessing Officer. Since service tax is part of receipt, therefore, for presumptive income, same has rightly been added by the Assessing Officer and reliance was also placed in the case of Technip Offshore Contracting BV (2009) 29 SOT 33 (Del.) and so far as Uttrakhand High Court judgment is concerned, which has been relied upon by the CIT(A), it .....

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t decision. Therefore, it was pleaded for confirmation of the impugned order. 8. We have heard both the sides, considered the material on record and find that similar issue arose before G Bench of the tribunal in the case of Sedco Forex International Drilling Inc. vs. Addl. DIT (International Taxation) in ITA No.5284/Del./2011, has decided the issue in favour of the assessee and relevant portion of the decision, which has been dealt with by the tribunal in its order as under: 4. …… .....

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ve profit u/s 44BB, subsequently, Hon ble Uttarakhand High Court decision dated 24th July, 2009 in the case of DIT & Anr. Vs. chlumberger Asia Services Ltd. ,317 ITR 156(Uttarakhand) concluded that reimbursement of custom duty paid by the assessee could not form part of amount for the purpose of deemed profits u/s 44BB unlike the other amounts received towards reimbursement. Following the view in this decision, Mumbai Bench in their decision dated 20.4.2011 in I.T.A. no.8845/Mum/2010 in the .....

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f the case as also the aforesaid decisions relied upon by the ld. AR. We find that Hon ble jurisdictional High Court in their aforesaid decision Halliburton Offshore Services Inc. (supra) while adjudicating an identical issue relating to reimbursement of freight & transport charges in respect of equipment, concluded as under:- 5. Sec. 44BB provides that the deemed profits and gains under sub-s. (1) shall be @ 10 per cent of the aggregate amount specified in sub-s. (2). We proceed to analyze .....

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n hire used, or to be used, in the prospecting for, or extraction or production of, mineral oils in India. Clause (b) of sub-s. (2) refers to the amounts, (A) received by assessee in India on account of the provision of services and facilities in connection with, or supply of plant and machinery on hire used, or to be used, in the prospecting for, or extraction or production of, mineral oils outside India, and (B) deemed to be received by the assessee in India on account of the provision of serv .....

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0 per cent. Therefore, in our view, the Tribunal fell into error in not appreciating the difference between the amount and the income. Amount paid or received refers to the total payment to the assessee or payable to the assessee or deemed to be received by the assessee, whereas income has been defined under s. 2(24) of the IT Act and s. 5 and s. 9 deal with the income and accrued income and deemed income. Sec. 4 is the charging section of the IT Act and definition as well as the incomes referre .....

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s as per provisions of s. 44BB to the ONGC and imposed the income-tax thereon. 5.1. In the light of view taken by the Hon ble jurisdictional High Court in their aforesaid decision, especially when the ld. AR accepted the position that the issue is squarely covered by the aforesaid decision while no other contrary decision was brought to our notice nor the ld. AR placed any material before us, controverting the aforesaid findings of the DRP and the AO, we have no hesitation in upholding the findi .....

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s or facilities or supply specified u/s 44BB of the Act provided by the assessee to ONGC, have to be included in the total receipts for the purpose of determination of presumptive profit u/s 44BB of the Act. It is well established that section 44BB of the Act is a special provision, treating 10 per cent of the aggregate amount specified in sub-s. (2) of s. 44BB as deemed profits and gains of such non-resident assessee who is engaged in the business of providing services or facilities in connecti .....

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see (whether in or out of India) on account of the provision of services and facilities in connection with, or supply of plant and machinery on higher used, or to be used, in the prospecting for, or extraction or production of, mineral oils in India, (c) received by the assessee in India on account of the provision of services and facilities in connection with, or supply of plant and machinery on higher used, or to be used, in the prospecting for, or extraction or production of, mineral oils out .....

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